A note on the relevance of prudence in precautionary saving

Luigi Ventura

Economics Bulletin, 2007, vol. 4, issue 23, 1-11

Abstract: The aim of this note is to suggest that prudence, i.e. convexity of marginal utility, can only explain a small share of precautionary savings, which we may define as savings generated by variance in income. Therefore, if we are willing to admit that precautionary savings constitute a sizable share of total savings, other factors should be called for. We present a few examples showing that risk aversion might constitute one such factor.

JEL-codes: D8 G0 (search for similar items in EconPapers)
Date: 2007-06-17
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Citations: View citations in EconPapers (3)

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